Organization Structure and Design Chapter 12 Fundamentals of Organizational Behavior 2e Andrew J. DuBrin PowerPoint Presentation by Charlie Cook

Learning Objectives Identify and define the foundation concepts of organization structure, including the informal structure. Specify the basic features of the bureaucratic form of organization, including how it is divided into departments. Describe key modifications of a bureaucratic structure: matrix, flat, and outsourcing. Describe the two contemporary organizational designs referred to as horizontal organizations and network organizations. Understand why a new type of organization chart called an organigraph can contribute to understanding organization structure. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Organizations Organization Organization structure Is a collection of people working together to achieve a common purpose (or simply a big group). Organization structure Is the arrangement of people and tasks to accomplish organizational goals. Organizational design Is the process of creating a structure that best fits a purpose, strategy, and environment. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Foundation Concepts of Organizational Structure Mechanistic versus Organic Mechanistic organizations are hierarchical bureaucracies with an emphasis on specialization, control, and vertical communications. They rely heavily on rules, policies, and procedures. Organic structures are laid out as networks and emphasize horizontal specialization, personal coordination, and extensive informal communications. They have loose rules, policies, and procedures that allow for rapid responses to changes in the environment. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Foundation Concepts of Organizational Structure Formal versus Informal Structure Formal organizational structure Is an official statement of the reporting relationships, rules, and regulations that guide and govern the conduct of business by the organization. Informal organizational structure Is a set of unofficial working relationships providing the flexibility that take care of events and transactions not covered by the formal structure. Is revealed using social network analysis to trace informal social relationships and communication channels. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Foundation Concepts of Organizational Structure Formalization Is the degree to which expectations regarding the methods of work are specified, written down, and enforced. Produces an organization with highly specialized labor and high delegation of authority. Is associated with mechanistic (bureaucratic) organizations. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Foundation Concepts of Organizational Structure Centralization Is the extent to which executives delegate authority to lower organizational units. Less delegation = more centralization. Strategic decisions are more likely to be centralized than operational decisions. The use of functional units is a feature of centralization. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Foundation Concepts of Organizational Structure Complexity Refers to the number of different job titles and organizational units in an organization. Increases the difficulty of managing an organization. Typically increases with the size of the organization. Differentiation A horizontally differentiated organization has many different job titles. A vertically differentiated organization has many different levels. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Foundation Concepts of Organizational Structure Tight versus Loose Coupling Coupling is the extent to which organizational parts are interdependent. Tight coupling between parts is indicated if a minor change in one part produces a large change in an associated part. The degree of coupling in businesses has increased due to the increasing interdependence of the parts or subsystems of organizations today. Organizational design is influenced by coupling and the increased necessity for flexibility to meet changing market conditions. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Weber’s Ideal Organization: Bureaucracy Rules and procedures controlling the organizational structure. A high degree of differentiation among organizational functions. A high degree of job specialization. An organization of offices determined by hierarchy, with each unit reporting to a higher unit. A heavy emphasis on rules and norms to regulate behavior Interpersonal relations characterized by impersonality in place of favoritism. Selection and promotion based on merit. All administrative actions recorded in writing. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

The Bureaucratic Form of Organization Machine Bureaucracy Uses standardized work processes and is efficient. Best use is in large organizations. Professional Bureaucracy Standardizes skills for coordination and is composed of a core of highly trained professionals. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

The Bureaucratic Form of Organization Power and Authority Number of Employees High Low Few Many Top- Level Managers Middle-Level First-Level Operative Employees EXHIBIT 12-1 A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

The Bureaucratic Form of Organization The Contribution of Bureaucracy Makes possible large-scale accomplishments and accountability for results. Bureaucratic layers contain managers with precious skills and expertise. If eliminated, the organization may suffer. Restructuring may destroy valuable organizational memory. Potential Dysfunctions of a Bureaucracy Carrying bureaucratic characteristics to extremes suppresses innovation and decision making, lowers productivity, and creates inconvenience and inefficiency. Workers experience high frustration and low satisfaction. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Sources of Individual and Subunit Power Departmentalization Is advantageous in that it gives major attention to enhancing product growth or service to customers. Is the process of subdividing work into specialized departments. Functional Departmentalization Is grouping people according to their expertise. Territorial Departmentalization Is grouping subunits according to the geographic areas that they serve. Internationalization of business has increased the need for organizing subunits territorially. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Sources of Individual and Subunit Power Departmentalization (cont’d) Product/Service Departmentalization Is arranging units by the product or service they provide. Customer Departmentalization Creates a structure based on customer needs. Hybrid (or Mixed) Organization Structure Combines the advantages of different organizational types. Line versus Staff Line groups are responsible for the primary purposes of the firm whereas staff groups are responsible for secondary purposes. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Functional Departmentalization President Vice President Finance and Chief Financial Officer Human Resources Engineering Operations Marketing EXHIBIT 12-2 A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Product-Service Departmentalization CEO Vice President Human Resources Engineering Operations Marketing Human Resources Small Appliance Division Large Real Estate Development Airplane Engines EXHIBIT 12-3 A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Hybrid Organization Structure CEO Vice President Palm-Size Computers Printers Desktop Domestic International Operations Marketing and Sales Human Resources Manufacturing Logistics Compensation Training and Development EXHIBIT 12-4 A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Mixed Organizing at Various Levels CEO Vice President Product Planning Sales Manager South West Executive Sales and Marketing Product Planning and Design Operations Marketing Manufacturing Information Systems East Midwest Special Projects Advanced Plannning Environmental Regulations Current Product Planning EXHIBIT 12-4A A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Key Modifications to the Bureaucratic Structure Matrix Organization Is a project structure superimposed on a functional structure to take advantage of new opportunities and solve special problems. Projects are temporary groups of specialists working under one manager to accomplish a fixed objective such as launching a new product. Matrix structure creates a dual reporting challenge—the involved employees may have to report to two bosses. A key advantage is to implement projects quickly. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Matrix Organization in an Electrics Company Quality Analyst Information Systems Specialist Marketing Operations Technician Electrical Engineer Laptop Computer Project Cellular Phone Horizontal Flow of Project Authority and Responsibility Personal Digital Assistant President or General Manager Vertical Flow of Functional Authority and Responsibility EXHIBIT 12-5 A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Flat Organizational Structures and Downsizing Has relatively few levels. Is less bureaucratic because: There are few managers available to review decisions. Short chain-of-command creates less concern about authority differences among people. Are more efficient than tall organizations. Requires that managers be conscious of the effects that downsizing to a flatter structure has on surviving employees. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Outsourcing as an Organizational Arrangement Is having work done by other organizations. Is a method of dividing the work between groups on the outside with groups on the inside. Reduces the need for employees and physical assets and reduces payroll costs. Can create ethical dilemmas for companies who have no control over the actions of their outsourcing suppliers. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Leading-Edge Organizational Structures The Horizontal Structure Is the arrangement of work by teams that are responsible for accomplishing a process. Is a structure in which employees take collective responsibility for customers. Reengineering Is the radical redesign of work to achieve substantial improvements in performance. Searches for the most efficient way to perform a task. Organizes work horizontally rather than vertically. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

A Horizontal Structure Customer Request Order Fulfillment Operations Specialist IT Finance Marketing EXHIBIT 12-6 A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

The Network Structure A Network Structure (or virtual organization) Is a temporary association of otherwise independent firms that are linked by technology to share resources and markets. Is horizontally oriented. Requires that its members trust one another. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.

Organigraphs: Drawing How Companies Really Work Maps that provides an overview of the company’s functions and the way people organize themselves at work. Help understand organizational functioning. Assist in expanding into new markets and opportunities. Exhibit 12-7 in the textbook depicts the current configuration of a bank and strategic options for altering the structure of the organization. A. J. DuBrin, Fundamentals of Organizational Behavior, Second Edition. Copyright © 2002 by South-Western.